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Homework answers / question archive / Havermill Co

Havermill Co

Accounting

Havermill Co. establishes a $350 petty cash fund on September 1. On September 30, the fund Is replenished. The accumulated receipts on that date represent $83 for Office Supplies, $157 for merchandise inventory, and $32 for miscellaneous expenses. The fund has a balance of $78 On October 1, the accountant determines that the fund should be increased by $70. The journal entry to record the establishment of the fund on September 1 is: 
Multiple Choice 
ODebit Miscellaneous Expense $350: credit Cash $350 • Debit Petty Cash $350, credit Accounts Payable $350 ODebit Cash $350; credit Petty Cash $350 ODebt Cash $350; credit Accounts Payable $350 ODebt Petty Cash $350. credit Cash $350 

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Since petty cash amount will increase on establishment of fund it should be debited, as cash amount will decrease after transferring it to petty cash, cash account should be credited.

 

Journal Entry:    
Date Account Titles and Explanation Debit Credit
Sep-01 Petty Cash  $350   
  Cash    $350 
  (Being entry made to record the establishment of the fund)

 

So, the correct option is 4th "Debit petty cash $350, credit cash $350".

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